CNBC reports on an alleged case of insider trading:
The SEC says a trader purchased 2,500 out-of-the-money call options on shares of Heinz for $95,000 on Feb. 13. The options give the purchasers the right to acquire 250,000 shares at $65 each until June. The stock was trading at just over $60 a share at the time. The out-of-the-money call options weren’t very popular. On Feb. 12, only 14 $65 June call options were traded. On the day before, none at all.
When Berkshire Hathaway and 3G Capital Management announced a buyout, the stock rose to about $72. The price of the June 65 call options, now very much in the money, surged 1,700 percent. The $90,000 investment had been turned into $1.8 million.
The article points out that the SEC has frozen the Zurich-based trading account, leaving the beneficiary a dilemma – though their identity is confidential under Swiss-banking rules, they would have to go to court in the US to unfreeze the assets:
At that point, the SEC will likely publicly brand this person a securities fraud. If the trader doesn’t come forward by June, his investment goes to zero.